Here’s an eCommerce nightmare; Having too much inventory of a slow-moving product while being sold out of all your popular items. Inventory can be really, really messy.
Welcome to Brave and Boss! I’m Kristi Soomer. On this episode, I'm going to be talking all about inventory and forecasting. How do you ensure that you have the right product in at the right time and that you don't run out too soon or overstock?
Let's dig into this incredibly important aspect for product-based businesses.
[00:01] Introduction to Inventory Management
- When dealing with product-based businesses, there is a lot on the line in terms of inventory. One of the biggest challenges is to really maintain just enough inventory that can meet demand, but not as much that you have no cash flow.
What is the ideal month on hand of inventory that I need as a brand?
- It depends on your business model, where you're sourcing from, and how quickly you can turn over items.
- As a general rule, you don't really want to be getting over a year of inventory
[05:52] Tools for Managing Inventory
- Shopify’s built-in inventory management will give you reports on your velocity and turn in Shopify directly
- A cloud ERP software to help you connect all of your sales channels
[08:03] Sales Forecasting
You should be forecasting sales in order to know what you're going to do for the year by month. One major reason to be able to meet demand, you need product.
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- Start with already existing data. Look at those numbers and then plot out key promotions that you're doing, key product launches, and do some estimates to figure out what that might look like this year.
- It's never gonna be perfect. But we want to average you out into making these really good revenue estimates so that you can plan your inventory to support those goals as well. And that's why we want those revenue goals to be really realistic.
[12:50] Your Online Store Experience
Once you have your month by month revenue goals and your inventory status, next thing to do is figure out:
- Your retail value of inventory
- Your cost value of inventory in total
- Based on your revenue forecast, what you have on hand
- Understand this number and pull it on a very consistent basis because this is where people start to get lost.
- Remember: You can forecast demand, but then things
- So you have to be constantly looking at this data, otherwise, you won't know. And it's just like financial data if you put your head in the sand and use hope that things are going to be okay. I mean, they might be but the more you grow, and the more revenue you have, the more inventory and cost of goods sold and people you hire, the more responsible you have to be about your financials and your cash flow otherwise, it will start to suck you up and suck you in.
[15:54] Wrapping Up
- Inventory management is something that becomes more and more important as you grow. I'm a huge fan of setting you guys up for success when you're just starting out, so that you have a proper foundation to scale from.
- Final words
“It's never gonna be perfect. You may be high, you may be low, but we want to average you out into making these really good revenue estimates so that you can plan your inventory to support your goals.” - Kristi Soomer
“You have to be constantly looking at this data, otherwise, you won't know. The more you grow, and the more revenue you have, the more inventory and cost of goods sold and people you hire, the more responsible you have to be about your financials and your cash flow, otherwise it will start to suck you up and suck you in.” - Kristi Soomer
This episode is sponsored by ChipBot
ChipBot is a plugin for product videos, customer support, and popups. Online stores install ChipBot to increase landing page sales, retain customers after a sale, and to do so without spending effort on each customer.
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